Advisor Glidepath invests participant accounts into the adviser’s
model portfolios according to the glidepath they define, which sets rules
based on participants’ current ages and the time remaining before they reach
their target retirement ages.
Portfolio adjustments are made automatically over time,
transitioning to more conservative portfolios as the participant moves toward
and beyond retirement. Once the adviser has set up their custom glidepath, it
may be used in any of their other plans as well. The Advisor Glidepath service
also offers advisers the option of adding a risk tolerance component to link
each individual glidepath to the plan participant’s personal tolerance for
market risk.
“For the adviser, this service provides a tool to help grow assets
under management by making it more attractive for a participant to decide to
enroll in the plan and take advantage of professional asset allocation over
their working lifetime,” said Dennis Sain, Newport senior vice president of retirement services. “Additionally, it provides advisers with a competitive
advantage to be able to provide a unique industry-leading service.”
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The Department of Labor’s (DOL’s) Employee Benefits Security
Administration (EBSA) issued Field Assistance Bulletin (FAB) No. 2012-02R, which supersedes Field Assistance Bulletin No. 2012-02. On May 7, the DOL
issued Field Assistance Bulletin No. 2012-02, which provides guidance to its
field enforcement personnel in question-and-answer format on the obligations of
plan administrators under a final regulation to improve transparency of fees
and expenses to workers with 401(k)-type retirement plans (see “DOL
Issues Additional Guidance for Participant Fee Disclosures”).
Some plan sponsors and service providers were
concerned about question 30 regarding brokerage windows and other arrangements
that enable plan participants and beneficiaries to select investments beyond
those designated by the plan (see “DOL’s
Answer in Fee Disclosure Guidance ‘Surprising’”).
Jason Roberts, CEO of Pension Resource Institute and
managing partner at Roberts Elliott LLP, told PLANADVISER that some in
the industry thought the DOL had essentially created a rule through Field
Assistance Bulletin 2012-02. The revised FAB seems to provide some relief for
plan fiduciaries concerned about the original guidance.
“While the original FAB 2012-02 would essentially
have created new law—imposing unreasonable requirements on employers that
provide mutual fund windows and brokerage windows as investment options in
their 401(k) plans—the revised FAB … takes a much more practical approach,”
said Lynn Dudley, American Benefits Council senior vice president of policy, in
a statement.
American Benefits Council said the revised FAB
eliminates several significant fiduciary requirements that were not provided
under current law but had been included under question 30 of the FAB as
originally drafted—including requirements that a plan must have “a manageable
number of investment alternatives,” monitor for “significant investment through
a brokerage window” and provide participant disclosures for any investment
selected through a brokerage window by at least 1% of participants to qualify
for the safe harbor test.
“In the short term, this [revised FAB] certainly addresses the issues the
Department of Labor created,” said Bradford Campbell, counsel, Drinker Biddle
& Reath LLP’s Employee Benefits & Executive Compensation Practice
Group, and EBSA’s former assistant secretary of labor. “They stopped trying to
write regulatory language into a guidance document.”
However, Campbell said he is still concerned about
one sentence in the revised FAB: “Nonetheless, in the case of a 401(k) or other
individual account plan covered under the regulation, a plan fiduciary's
failure to designate investment alternatives, for example, to avoid investment
disclosures under the regulation, raises questions under ERISA section 404(a)'s
general statutory fiduciary duties of prudence and loyalty" (see "DOL
Issues Clarification to Participant Fee Disclosure Guidance").
This sentence suggests that an entire plan
design—a brokerage window-only design—may not be appropriate according to the
DOL, Campbell said. He added that the original regulation did not require a
plan to have a certain number of designated investment alternatives (DIAs), but
the FAB suggests that if a plan does not, it raises fiduciary questions.
“With respect to a plan that has a robust menu and
a brokerage window, I don’t think anything has changed,” he said, but brokerage
window-only plans could run into trouble in the future. This may be DOL’s
“warning shot,” he noted.
Roberts agrees that the DOL may be more closely
monitoring these types of plans. “It tells me they’re going to look into the
decisions made around those options,” he said.